Today marks the start of the EU Summit, one event designed to get the EU and the UK closer to a Brexit deal. Considering that we are already in the middle of October and the end of the year deadline nears, the Summit ahead presents a great opportunity to finally have a Brexit resolution.
Ongoing Negotiations Reveal More Work Ahead
As with any negotiation that takes place at such a high level, we do not know much in advance. But headlines do move the currency market, nevertheless.
Consider yesterday. At one point in time, the GBP traded with a very weak tone. The GBPCHF fell below 1.18, the GBPUSD below 1.29, and EURGBP above 0.91. As it turned out, the EU already drafted a document to be published at the end of the Summit, saying that more work needs to be done and that the EU wants a deal but not at all costs.
However the UK then replied, saying that it will not withdraw from the negotiations immediately. Obviously, no one can determine the term “immediately” and quantify the time. But the currency market did not need anything else – the GBP bounced strongly.
Just like that, the GBPUSD moved above 1.30, reaching 1.3060. Also, the EURGBP cross fell back to the 0.9 level, and the GBPCHF regained 1.19.
The round numbers are key for the GBP moving into the Summit and the end of the year trading – 1.30, 0.9, and 1.2 for GBPUSD, EURGBP, respectively GBPCHF.
Planned for today and tomorrow, the Summit will likely bring new details to the table. One thing is for sure – both parties want an agreement as soon as possible.
The pandemic caused the public to shift the attention away from Brexit. At the same time, the pandemic dynamics forced states and governments to focus on health issues rather than political ones.
Brexit has been ongoing since 2016. A couple of months prior to Trump’s election in the United States, the UK decided to vote for exiting the European Union.
What followed was an ongoing saga that took headlines all this time. In the meantime, the Irish border, common fisheries or where the EUR will clear after Brexit, are still part of this Summit.
The sooner these issues are resolved, the better for all involved parties.